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Books by Grigory Yavlinsky
Economics and Politics in Russia
The Center for Economic and Political Research (EPIcenter)
Nizhni Novgorod-Moscow, 1992
CHAPTER 2. The New Policies of the Administration.

2.3. Regional approach

Economic prerequisites

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Economic reasons are the most important factors of integration, and using them one can keep track of the probable behavior in the given majority of the regions. One can cite two different reasons: Existing imbalance in economic development of the regions and the existence among many republics of certain advantages -- their own sort of "economic trump card."

Inequality in the development among the different regions of Russia, being naturally tied to natural resources, to a definite extent is the result of the forced territorial distribution of labor in the period of socialist industrialization. The unity of this system, based on a tight centralized interregional redistribution of resources and production, must unavoidably collapse with the transfer to market horizontal ties and with the changes in geography and the state of the Russian market.

The development of this process will lead to a change in appearance of the "highly developed" regions, and within a certain period of time, providing that the economy adapts to new conditions, it will turn the majority of the regions into depressed conditions.

The leadership of many of Russia's regions consider that the center inhibits greatly their use of their own "economic trumps," thanks to which the region will "live better." These comprise such things as a qualified work force, the development of agriculture, powerful diversification in industrial production potential, a monopoly in an export or product in short supply, the existence of unique production facilities and enterprise monopolists, and profitable economic location (on borders, on seas and along main transportation channels).

The desire for sole possession of these "trumps" is creating a powerful potential for the isolation of regions. True, it is gradually becoming clearer that each of those advantages is only significantly manifested in combination with other regions and can be realized only in a sufficiently robust market.

To a great extent the desire for exclusivity is inherent in those regions holding natural resources, which have in the next 5 to 10 years a unique chance to create the foundation for long-term stable development. For the exhaustion of resources, the adaptation of the economic structures of other regions, the lowering of the material and energy capacity of the final products, and the increase in quality and competition of similar products in the world market from other regions with such natural resources, will all result in the reduction of the isolated regions' advantage. If in that time those regions do not create conditions for the diversification of their economy, then they may very will return once again to the club of depressed states.

There is yet one more group of regions that is interested in the decentralization of power. That is the border and sea states which are trying to turn into free economic zones with the plan of eventually joining highly developed nations. However a rise in the economic strength of all the regions of the country is in their interests as well, because all of their advantages will come to nothing should there occur a general decline in the economy.

And finally, there are the agricultural regions which see that their interests lie in the protection and improvement of the capacity of the domestic market as economic leadership decentralizes.

Those regions with developed manufacturing sectors have the most potential to work for integration. The very existence of those regions that manufacture final products and that specialize in scientific technologies depends on the development of economic interdependence among different regions. The saturation of these regions with defense production facilities suggests their objective orientation (at least until military conversion occurs) toward the center. These regions in coming years will be most tightly tied to center-oriented efforts. Should the center not be able to execute economic policies in the regional interests and create initiatives for the restoration of technologies and the greater competitiveness of the products produced by enterprises, then it will be these kinds of groups that act as the "seed crystal," taking upon themselves the unification function.

Finally, in Russia there have always been and will continue to be in the foreseeable future those regions that not only lack significant economic advantages, but simply are unfortunate in their natural and economic conditions (e.g., Kalmykia, the Dolgano-Nenets and Evenky autonomous areas and the Korsky Republic). Likewise there exist regions that are facing strong demographic pressures (e.g., the republics of the North Caucasus). These regions, by the directions of their economic interests, will always depend either upon the center or on currently forming interregional "seed crystals", and are interested in the availability of economic mechanisms for their support.


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